A provocative, unsponsored assessment of current and future legal, regulatory, marketplace, and cultural issues affecting telecommunications and information policy presented by Rob Frieden, Pioneers Chair and Professor of Telecommunications and Law, Penn State University

Monday, August 9, 2010

The Good, the Bad and the Ugly in the Google-Verizon Legislative Framework

Google and Verizon have developed a “Proposal” on Internet access which I am sure they expect to serve as a template, starting point and frame of reference going forward. See Google-Vz Deal. In light of the FCC’s judicial reversal in the Comcast case, the absence of substantive progress at the FCC and the unlikelihood of congressional action, two major stakeholder can and have taken the lead.
It should come as no surprise that Verizon and Google have emphasized and begrudgingly compromised on their corporate interests. Any support for an “open Internet” and consumer protection is subordinate, or the product of serendipity.

The Good.

The proposal embraces three of the four Internet policies briefly articulated by the FCC in 2005. They pass on endorsing competition, but at least indirectly now agree that the 1968 Carterfone policy applies to the Internet, wired and wireless. Additionally, they support non-discrimination, albeit not applicable to wireless and conditioned by the ambiguous modifier “undue.” Google and Verizon accept exclusive FCC jurisdiction to oversee broadband Internet access service along with hefty fines for violations. The companies wisely exempt software applications, content or services from FCC jurisdiction.

The Bad.

Google apparently caved on applying the conditional non-discrimination policy to wireless, an increasingly important broadband medium. The rationale for exempting wireless does not pass the smell test: “the unique technical and operational characteristics of wireless networks, and the competitive and still-developing nature of wireless broadband.” The technical and operational aspects of wireless strongly necessitate the non-discrimination requirement. Spectrum scarcity, ISPs’ incentive and ability to discriminate in favor of corporate affiliates or favored third parties, deep packet inspection, traffic throttling, and the ability of ISPs to obscure discriminatory practices necessitate FCC scrutiny of discriminatory and anticompetitive practices. Wireless carriers in the U.S. operate in a mature market with near saturation in voice market. The top four carriers control over 92% of the market and the top two with over 60% share (Verizon and AT&T) are vertically integrated and have substantial wireline broadband market power. This is hardly an infant industry in need of government nurturing.

Increasingly consumers will use wireless broadband as their preferred medium for Internet access. I have parted with network neutrality advocates by supporting some types of price and Quality of Service discrimination, including “better than best efforts” routing. However, abandoning scrutiny of discriminatory practices all but guarantees that ISPs will migrate from controversial, but lawful practices, into the realm of what Comcast did and beyond.

The Ugly.

A vacuum of leadership, initiative and follow through has provided Google and Verizon with this opportunity to help shape the agenda and frame the issues. The FCC has a history of deferring to industry to compromise and reach consensus. In old school telephony, the major interconnection and revenue sharing arrangements for decades occurred when the National Association of Regulatory Utility Commissions decided it was time. The NARUC-managed deals took the name of the location where the association members met, e.g., The Ozark Plan. So there is a history of stakeholders making the deal.

Still I feel as though the “fix is in” when major stakeholders can cut a deal and move on to the main goal of “enhancing shareholder value.” I would like to see the addition of “in a socially responsible manner,” but that may be too much to expect even from “do no evil” Google.

The analysis in the above article ignores the bigger picture. At the same time that its joint proposal with Verizon is willing to yield on regulation of wireless, Google is funding multiple "astroturf" lobbying groups (e.g. Public Knowledge, the New America Foundation, the Open Internet Coalition, Free Press) which are lobbying for stringent regulation of wireless. It's thus playing both sides of the fence, allowing its astroturf lobbyists to pretend not to be beholden to it and to claim to be serving the "public interest" by advocating more restrictive regulation. It is also trying to reframe the debate as being HOW MUCH to regulate rather than WHETHER to regulate. No one should fall for this. All of Google's proposed "network neutrality" regulations -- which aren't one bit neutral -- would be harmful to competition and to consumers and should be summarily rejected.

About Me

Rob Frieden serves as Pioneers Chair and Professor of Telecommunications and Law at Penn State University.He also provides legal, management and market forecasting consultancy services and has written four books, most recently Winning the Silicon Sweepstakes: Can the United States Compete in Global Telecommunications published by Yale University Press. Rob has written over one hundred articles in law reviews and telecommunications policy journals and has provided commentary in a variety of trade periodicals. He updates a major communications treatise: All About Cable and Broadband (Law Journal Press).

Rob has held senior policy making positions in international telecommunications at the United States Federal Communications Commission and the National Telecommunications and Information Administration.In the private sector, he practiced law in Washington, D.C., and served as Assistant General Counsel at PTAT System, Inc. where he handled corporate, transactional and regulatory issues for the nation's first private undersea fiber optic cable company. Professor Frieden holds a B.A., with distinction, from the University of Pennsylvania (1977) and a J.D. from the University of Virginia (1980).